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Netflix promises to rile up customers over Net Neutrality ruling

If big American internet service providers get their way, how you watch movies on streaming services like Netflix and how much you pay for those services could be changing very soon.

Last week, a landmark court ruling put an end to Net Neutrality rules in the United States. The Net Neutrality rules were put in place by the Federal Communications Commission (FCC) in 2010 to ensure that internet service providers (ISPs) couldn’t charge customers more money for preferred access to certain websites and services like Netflix or degrade service for those who didn’t pay the premium. Net Neutrality is seen by many online advocates as the key to keeping the internet open, free, and available to everyone. Without such rules, companies can and likely will charge customers more for the right to access sites like Facebook and services like Netflix.

Unsurprisingly, it was U.S. telecom giant Verizon (which is both a cable TV company and ISP) that appealed the FCC’s Net Neutrality rules, opening the door for them to jack up rates on everything from streaming movies, checking your webmail account, using Twitter or surfing Facebook.

However, it appears that Netflix isn’t prepared to roll over for ISPs like Verizon quite yet. The company threw down the gauntlet in a recent letter to investors.

"Unfortunately, Verizon successfully challenged the U.S. net neutrality rules," the company said. "In principle, a domestic ISP now can legally impede the video streams that members request from Netflix, degrading the experience we jointly provide."

The company’s stock is currently soaring and reports recently revealed their subscriber base now outnumbers that of premium TV cable network HBO. Netflix appears ready to rally that huge subscriber base should ISPs decide to gouge customers who use the movie streaming service.

"Were this draconian scenario to unfold with some ISP, we would vigorously protest and encourage our members to demand the open internet they are paying their ISP to deliver."

While it may sound like nothing more than corporate bluster directed at another company, the loss of Net Neutrality means consumers could very well be paying more .

Imagine having to pay $5-10 for a Streaming Package (on top of your current internet service) for the right to use a streaming service like Netflix, Rdio (services you already pay to subscribe to) or even YouTube. Without Net Neutrality rules, if you don’t pay the extra fee your ISP could degrade the performance of those services or deny you access to it altogether. Sound fair?

It’s quite telling that companies like Verizon offer their own competing video-on-demand services - VOD services that conveniently don’t count against a monthly bandwidth cap like Netflix does. Netflix, the new kid on the block, is seen as a direct threat to the interests of Verizon and other companies in the traditional TV and internet business and thus they are trying to outmanoeuvre and out-lawyer their new web-based competition.

So what does the loss of Net Neutrality stateside mean for Canadians? Not a whole lot at the moment, but it does set a dangerous precedent. Being in both the TV and internet business, Canadian telecoms like Rogers and Bell are not all that different from Verizon. If something works well for Verizon in the US, The two major Canadian telecoms are quick to ape the successful practices their American counterparts. Similarly, Rogers and Bell run VOD services designed to compete with Netflix, and see the company's Canadian arm as a serious competitor to those offerings.

Unfortunately, Net Neutrality rules in Canada are still not very clear cut, which means that companies like Rogers and Bell often take advantage of lax Canadian Radio, Television, Telecommunications Commission (CRTC) rules. If Verizon starts charging its customers a premium to access services like Netflix, expect Rogers and Bell to try to do the same thing in Canada. Should that happen, the major telecoms will likely find out the hard way that getting in the way of millions of customers streaming "Breaking Bad" is probably a bad idea.